Online focus creates lockdown winners in South Korea
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Sophie Kim developed a taste for good quality food from childhood, when she was nurtured by her grandmother who also happened to be a great cook. After later spending 13 years studying and working abroad, Kim returned to South Korea in 2013, but she soon became frustrated by having to go from one market to another in search of premium-quality groceries.
“I thought how good it would be if fresh products, like milk and eggs, that we eat almost every day get delivered to our doorsteps in the morning — even if we order them late at night,” she says.
Seizing on the demand among young, wealthy South Koreans for healthy eating, Kim founded Market Kurly in 2014, offering organic products at affordable prices with superfast delivery.
It has since become the country’s major overnight online delivery company focusing on groceries.
“We have highly curated offerings for working moms, who think about what to cook the next morning after their kids go to bed,” says the 37-year-old chief executive. Kim says she spends every Friday tasting and testing hundreds of new products to ensure their quality.
Market Kurly’s growing popularity has taken it to 17th place in this year’s FT list of 500 high-growth companies in the Asia-Pacific region, compiled in partnership with Nikkei Asia and Statista, a research company. It secured its place with a compound annual growth rate in revenues of 191.3 per cent between 2016 and 2019. That took total revenue in 2019 to $370m.
A promise to deliver fresh produce from farm to table in 24 hours had already established Market Kurly one of South Korea’s fastest-growing ecommerce players, but it has since made the business a major beneficiary of the pandemic, too, as lockdowns prompted more consumers to go online for groceries.
Sales at the company more than doubled to Won952.3bn ($842m) last year, although operating losses widened to Won116.2bn because of heavy investment in logistics.
Market Kurly, which now has 7m users, is eyeing a listing in New York this year to give it an edge in a highly competitive domestic ecommerce market, following the $3.5bn initial public offering of ecommerce giant Coupang in March.
South Korea boasts one of the world’s largest and fastest-growing ecommerce markets, with nearly two-fifths of all purchases made online.
Underpinned by a nation of tech-savvy consumers, high mobile penetration and a dense population in the Seoul metropolitan area, the country’s ecommerce market is expected to grow 11 per cent, to $116bn, this year, following a 26 per cent expansion last year, according to research company Euromonitor.
In total, the country of 52m people is home to 22 companies in the FT ranking.
These include Spolive, a sports data and streaming company with a 2016-19 compound annual growth rate of 198.5 per cent, which is ranked 16th; Twinny, a robotics company ranked 101st; and Hyperconnect, a social media platform ranked 138th on the overall list.
Hyperconnect’s revenues jumped 50 per cent to more than $200m last year as socialising moved online amid the pandemic-induced lockdowns. It offers two popular live chatting and streaming apps — Azar and Hakuna Live — which enable users to make friends across countries by offering instant translation services.
US dating company Match recently announced a $1.73bn bid to take over Hyperconnect, which generates more than 75 per cent of its revenue in Asia.
“As more of our lives move online, people are looking for richer and deeper experiences,” said Match chief executive Shar Dubey in February. “Hyperconnect’s live video and audio engagement technology is a powerful tool that enables users to connect with new people and cultures on a global basis.”
But food-related companies had the highest 2019 revenues of all the South Korean entries in the FT ranking: Highland Foods with $440m, and Market Kurly’s $370m.
Market Kurly even beat Coupang to overnight deliveries in South Korea, by some three years, with a promise to deliver fresh groceries by 7am the next morning if an order is placed before 11pm.
This feat was made possible by the company’s aggressive investments in logistics, including five warehouses and temperature-controlled vehicles. Kim says that Market Kurly is still the country’s only ecommerce player to be fully equipped with the costly cold-chain logistics networks needed to protect product quality throughout the delivery process.
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And the company’s focus on quality over price has paid off. More than 60 per cent of first-time customers reuse its service, compared with the industry average of about 29 per cent, according to its internal data.
Market Kurly’s strength, says Kim, is accurate forecasts of customer demand and farm output, using data technology and artificial intelligence.
“Predicting consumer demand precisely is very important for us to optimise our inventory levels and minimise unnecessary waste as most of our products have a very short shelf life,” says Kim.
The company has raised about Won420bn in five funding rounds from investors including Sequoia Capital, Hillhouse Capital and DST Global and plans to continue investing in logistics and technology.